Ex-RH CEO Alberto Vitale Still Has a Lot to Say About Publishing

Alberto Vitale remains one of the most recognizable figures in the history of American publishing industry, largely thanks to his leadership over Random House from 1989 until 2002, a period that saw the company become an increasingly dominant commercial powerhouse. Nearly 80 years old, his voice remains confident and his memory sharp. Of Italian origin, Mr. Vitale is a powerful and passionate thinker, clearly used to being in charge.

Alberto Vitale (Image: via Knowledge@Wharton)

I recently had the opportunity to share lunch with Mr. Vitale at the storied Algonquin Hotel in New York City. Over the course of our excellent conversation, Vitale recounted some of the experiences that marked his long journey through the American publishing industry, and shared his ideas on how this industry is likely to evolve in future.

PP: What brought you to Random House in 1989?

Vitale: In 1989 I was asked by Mr. Si Newhouse if I would take over Random House, Random House being the number one English language publisher in the world, very prestigious, big, etc. So, I went to Random House. Before I was at Bantam Doubleday Dell, and I built it to a size that was comparable to Random House, or slightly smaller, maybe fifty to eighty million dollars in sales less than Random House. That is probably why Si Newhouse asked me to go to Random House.

Were you in Italy first?

I was here first in America with Olivetti, then I went back to Italy with the Agnelli Family Holding Company, the Istituto Finanziario Industriale (IFI), and there is where we had the opportunity to buy Bantam Books. People at IFI decided to buy and they sent me to America to do so. Soon after we bought Bantam, the people at Bantam whom I got to know very well, called me up and said… “Listen! The Chief Operating officer is retiring at age 52. Why don´t you come over and replace him?” I said yes. I came back to the States and… the rest is history!

And before all that, you were a Fulbright scholar here in the States?

Yes, I was at the Wharton School of Business, at the University of Pennsylvania, in Philadelphia. And while I was at Wharton, besides attending classes, I wrote to twenty Chief Financial Officers of American corporations, to ask if they could see me and tell me about their companies. All twenty accepted my request! So I got into a Greyhound bus, and I went to visit with them. I mention this because it shows what you can do in America if you have initiative.

What were the first changes you implemented in Random House when you arrived?

First of all I explained to the people at Random House that in order to be healthy and to be independent we needed to make money, because if you make money you are independent, and if you don’t make money you are always with your hand out asking for help. It is like Spain, Italy, Portugal and Greece of today. They spent too much money in social services and entitlement, and not enough on business and infrastructure, and so the countries are in trouble. In order to be independent you have to make money, if you don’t make money you lose your independence. That was in some circles a bit of a shock therapy.

One of the first things I did is to sit down with the head of Pantheon and I said to him: “We have to make money,” as they were losing money hand over fist. I wanted him to prepare a budget, and he refused to prepare a budget, and he refused to make any changes, so I said to him ‘goodbye.’ The next thing I knew, I had authors picketing outside the front door of the company. It was unpleasant…but the net result is that Pantheon is still alive and doing well today. These were some of the first changes. The other thing we tried to do was to improve our distribution in order to offer a better service to our clients; to improve marketing; and to improve the relationship between the people in editorial and the people in marketing and sales.

One of the interesting episodes that I had was that one day, very soon after I got there, I had wind of a big commotion. “What is going on?” I said. It turned out that the head of Knopf wanted to visit a couple of bookstores, and the sales department was very upset because he made that decision without asking their permission. So I said to the sales department: “What’s the problem with that? Look guys, you should kneel down and kiss his feet because he decided to go out and see what is happening in the field. Do not make such a big fuss!” That was another shock for these people. Slowly but steadily we brought a more cooperative style of business, less independent republics, more cross-divisional cooperation, and we tried to respect each other. We streamlined a few divisions, we created a few new divisions, we made some personnel changes, and we became more aggressive with pricing, putting higher prices where it made sense.

During the 13 years as a CEO, what were the most important changes you implemented?

Really, it was a different philosophy of management in running the company. I left a tremendous amount of independence to the publishers: the publishers were very responsible; we started to market books on the internet in 1991 or 1992, which was early. I got initiated to the internet by a young editor of science fiction who was around 20 years old. I was having coffee with her and I said: “Science fiction is a tough business, is a very limited marketplace and… how do you promote your books?” – “Well, I promote the books with publicity and I also started promoting them on the internet…” I looked at her and I said, “Inter-what?” She explained it to me, and I asked her: “Why don’t we promote all our books on the internet?” — “You mean it?” she said. And I said “Why not? But with one condition: that you keep it quiet.” So I went to Knopf and told them about the internet. I asked them: “Do you want to try it?” and they said “Yes!” So I told them: “Ok, but on one condition: that you do not tell anybody that you are doing it (because I wanted to create the demand for the internet within the company).” After two or three months I had all the other publishers asking: “Why is Knopf doing this and we are not?” So they also started using the Internet. The other thing we did was to put the reader first, so we had lots of focus on the customers in the bookstore. Basically it was a philosophy of management. You cannot do earthshaking things in publishing, you have to set the tone of how you want to go with an eye on costs and one eye on profits. But we never saved money when it came to buying a book. We fostered risk taking with a “grain of salt.” We had a fair share of best-sellers. But you never knew that a best-seller was going to be a best-seller until you published it.

Who are the authors you remember from this period?

There were so many. Well, I remember I was very eager to do the autobiography of General Colin Powell. I came from Italy, and even though I had been in America for a very long time, I still had the hang up of how do you reach a man at such a high level. So one day I lost patience and I called my secretary and said: “Listen, get me General Colin Powell at the Pentagon”. I had not yet put down the telephone when the phone rang again and General Colin Powell was on the line. I did not know what to tell him…But the next day I had lunch with him at the Pentagon. This is America, and we published his book! The other one is a book by Lee Iacocca; he was the head of Ford who eventually went to Chrysler. He saved Chrysler from bankruptcy almost singlehandedly by promoting Chrysler cars on television himself; he had a very strong, very impressive personality. So I went to him and said: “You have to do your autobiography.” He agreed to give me an appointment. The day I met him was supposed to be the day that Chrysler was going turn from loss to profit. And that day he came out of the meeting of the board of directors and, believe it or not, the numbers were not so good, so he was in a terrible mood. But we ended up doing the book, and this was the first multi-million-copy best-seller in hardcover.

I think you like non-fiction more than fiction, don’t you?

I personally like more non-fiction, but Random House was famous for fiction.

During this period of time, how did Random House prepare for the arrival of digital technologies? You mentioned marketing online.

Random House was very much aware of digital technologies and was the first publisher in 1992 or 1993 to decide that they would not sign any new publishing contract unless it contained digital rights. It was early in the game, and we started digitizing a lot of our books. But at the time they were difficult to exploit because there was not an adequate reader on the market. So it was only with the arrival of the Kindle in 2007 that publishers started to exploit their digitized books, but they moved very slowly and it was only after 2008, when the condition of book business became very very bad, that they actually “discovered” the value of digital publishing.

To what extent you think publishers need to change the way they do their job?

To be an editor nowadays you have to be also a producer: 50% editor and 50% producer. When you look at a book, you look at it in print, in hardcover, in paperback, in a digital format and, eventually, in an enhanced digital form. I think that publishers will have to concentrate in digital technology as it is challenging and continually evolving. In my opinion it also represents the future of publishing. The Kindle and the iPad are truly revolutionary and promising tools at the service of the publishers and the readers.

What do you think a right price for an eBook should be?

The price of the e-book should be $9.99 and down, I am convinced of that. Some publishers who have adopted the agency model are pricing them at $12.99 and $14.99 or more, and this is way too high. They might sell a lot of books at that price, but they would sell a hell of a lot more if they would price them at $9.99. One of the things that publishers have to be used to is the power of the internet. A lot of the books that are published digitally on the internet are bought on impulse. Many or even most of those books will never be read by the buyers. Often what matters to book buyers is possession: “I have the book, and eventually I will read it.” In the meantime there is a new book, and another new book, and another, and you buy them!

Going back to Random House, did Random House take any steps towards international development when you were there?

Oh yes! We spent a lot of time internationally with great success. The most important thing we did was to make sure that the British subsidiary was working well. When I got to Random House they had just bought a bunch of prestigious British imprints. They were all very good, but they were all losing money and they were not talking to each other. So, to solve this problem we appointed from within the very talented Gail Rebuck to be the CEO of the company. She eventually did and continues to this day to do a spectacular job…She is my hero!

Did you travel a lot?

Yes, all the time. I traveled a lot internationally and in the US in the field, because I made it a practice to go and find out what was going on from the salesmen. Every time I went somewhere in America or Canada, I would take a half day and I would meet with the salesmen and supervisors, without New York management…very informally. I learned more about what was going on, about the problems, opportunities and so on from those meetings than from anything happening in New York.

At that point, what was your relationship with Random House Spain, with its joint venture with Mondadori?

I started a distribution arrangement with Plaza y Janés, distributing Spanish titles in the United States. It worked… so so, partly because it was the very beginning, and also because from the beginning Plaza y Janés was not very well organized. But, from what I hear, the joint venture with Mondadori and Random House is working out very well and Random House Mondadori is very strong also in South America.

How did Random House work with South America?

Random House always distributed English Language books in South America, but the venture with Mondadori allowed not only publishing, but distribution very effectively throughout the Spanish speaking world in both English and Spanish.

What was Random House like when you left the company?

I will tell you a story that will summarize it: When we were selling the company I was meeting with Peter Olson (the CEO of Bantam Doubleday Dell), privately, and I was giving him an idea of the business of Random House. Every time we met, we went over the sales figures, and they were going up and up and up. At a certain point, Peter Olson said to me: “Listen, Alberto, leave something for me after I buy the company.” And I said: “But Peter! I am not doctoring the numbers. These are the numbers. And so, if after you take over, those numbers continue to grow up…good for you! And if they go down, you will have to do something about it!” But I was very lucky because for three years the sales kept going up. After that things changed…

What changes do you think have happened in Random House since it was purchased by Bertelsmann?

During the first years the company was doing ok. But then they made a couple of major strategic mistakes like closing down the client distribution business and after the first two or three years the company did not do too well. Then, in 2008 there was a change in management, and Markus Dohle came, and he had a really difficult time. One, because he didn’t know publishing. Two, because we had the worst recession after the great depression. He was a young man in his late thirties, very enthusiastic, a very smart marketing guy. He had to restructure the company to make it smaller and they had to consolidate imprints, warehouses, and offices here in New York in the face of a very difficult marketplace. He did a very good job. I have to tell you that, in hindsight, after five years, during his tenure, he has done a brilliant job. He did not do it alone, he had some very good people with him, but he was the CEO, he set the tone and now the company is doing very very well.

What do you think that right now are the main threats in the publishing industry?

I don’t like to talk about threats; I like to talk about opportunities, which is a big difference. I think everyone spending time talking about threats is wasting a lot of time and a lot of goodwill. The publishing industry is undergoing epochal changes because of the digital technology, but the digital technology is also affording the publishing world many opportunities that are unprecedented. You will see that, in the not too distant future, the profitability of these publishing companies will increase because of the digital technologies: no printing, no binding, no paper investment, no shrinkage, no returns, no inventory obsolescence…You can see already now that in the best publishing houses the profits are going up even in the face of a very difficult marketplace. And in the future it is going to be much more like that. So I look at the digital technologies and the internet as liberating factors that will allow publishers to make a lot of money. I told a group of Fulbright students recently: “You take Italy, you have 60 million Italians living outside their country, not necessarily Italian by birth, but of Italian extraction, who still speak the language. These people cannot buy an Italian book, but with the internet, through Amazon, they will have access not only to front list but also to the backlist of Italian publishers that before was mostly unavailable. So that should be a bonanza for Italian publishers and, of course, not only for Italian publishers.

It is the long tail, selling a little of a lot of things…

Yes. This is an opportunity. E-books are more accessible, the experience of buying is more personal. Here is what I mean: you no longer have to deal with a bookseller who looks down on you because he doesn’t know you, and who won’t help you to find a book. Nor do you have to deal with a big superstore where you cannot find the book you’re looking for. Now, you go to Amazon and it tells you: “Ah! You are the one who likes this type of books. Why don’t you look at these other books, in case you like them?” There is power in this internet. And the publishers who embrace the technology and who are smart enough or creative enough to go and move with it are going to be very profitable. An eReader can store 1,500 books. In my opinion, this is a major, major opportunity for publishers.

What do you think are the differences between the United States and Europe?

Europe is moving slowly, and the United States is moving very fast.

When do you think that Europe will begin to move faster?

Now, because they are in such a bad shape that they have no place to go but up. You cannot go further down than down. You look at Spain, Italy, Portugal, Greece, France and they are suffering. It is difficult. So I think that in the next five years we could have a major upswing. I believe they are going to react like the US publishers reacted in 2008. Europe has big problems: the unions, the socialistic approach…Everybody thinks that they deserve pension, they deserve vacation, they deserve education, they deserve medical care…Nonsense! Where is it written that when you are born you deserve all these things? It is nice to have them, but you have to earn them and generate the necessary funding. I believe meritocracy is the name of the game. Meritocracy generates initiative and I think Europe needs a lot of that.

What is your personal view about the new non-traditional publishing companies going into the industry? For example, Amazon, who is becoming a publisher. How do you think these moves will affect the traditional publishing industry?

It will wake them up. It will make them hopefully more aggressive. Free markets cannot be regulated. Competition is stimulating and there will always be winners and losers. I sincerely believe that it will make the publishing industry stronger.

What do you think about the DRM applied to electronic books to prevent them from being copied and what do you think about piracy?

First of all, we have always had piracy. Some piracy we knew we had, some piracy we didn’t know we had. I would say that the digital medium lends itself to piracy, but practically speaking, no! Theoretically speaking, yes! Who is going to scan a book and put it on the web? To what end? It can happen, but it is going to be incidental, it is not going to be the rule. Forms of piracy will always happen even though they are definitely against the law. Publishers will always defend their rights in court if necessary. However, I do not think that there is going to be a threat to intellectual property. Of course you have to remain vigilant and you have to enforce copyright rules, but some form of piracy, alas, will always be with us. DRM is a good step in the right direction that helps prevent worse things to come. So, it is positive.

In marketing it is common to say that the best thing is to be “first or best.” How important do you think it is to be the first in the digital world as a publisher?

Between first and best in the new economy, I would go for best. Because the minute you come up with something, you better have a better thing up your sleeve, because if you do not have it somebody is going to copy you. It is very fast paced.

Do you think that the ones that will suffer more will be small ones, or the big ones?

The big ones will suffer more, if they do not invest both financially, technologically and intellectually in the changes that are constantly happening. The changes have to be constant because the era of digital technology is an era of change, and you have to get organized for change. The best people to manage change are the young people. On the other hand, the independent publishers, as much as the big publisher, have a new lease on life because access to the web is powerful, and you did not have it before. If you were a small publisher and you went to Barnes and Noble, unless you hit on a best-seller, they would not even look at you. And now, on the web, it is anonymous, you go, you make your pitch, and you go for the best. So I would say that the most vulnerable, in my opinion, are the publishers who are not able to get on with the changes. Whether they are small or big, it doesn’t matter.

Before you mentioned editors need to be half editors and half producers.

Yes, a producer like in the movies! It has to be somebody who has the creative mind to sit down with the author and think about what else can be done with a book using digital technology. Publishers need a new mindset, a younger mindset that is more attuned to what is going on, and they probably will need a new dynamism, they will have to change the way they publish.

What do you recommend to the editors of the 21st century?

A good editor in the 21st century has to have good editorial instincts and good technology skills; has to be graphically creative and needs to have a mind for technology and new publishing formats. All this is more demanding than in the past.

What do you see for the book industry in ten years?

Print is not going to go away, print is going to stay. But print will become more precious. In other words, hardcover books will be better produced, better printed, better bound and much more expensive. Publishers will have to become much smarter in the ways they distribute books, so that they do not have big returns. If we order a book now at Amazon, tomorrow morning the book is in California delivered at your doorstep. Publishers have to try to get to that level of efficiency. Publishers need to use and exploit technology to disseminate intellectual property as far as they can in the formats that are the most appealing to the general public. And that will require an enormous amount of effort and also talent: have people who can relate to this new world. Apart from that, today publishing works with publishing seasons. My feeling is that publishing should be a continuum: you publish when you are ready to publish… I know that the model of publishing seasons is obsolete.

When you think about the future, do you think that Google and Amazon will increase or decrease their power?

I would say that Google, Amazon, Apple, Yahoo, maybe AOL are going to be very powerful factors. I think that they will be more important on the distribution side of things than in the creative side of things. And so I certainly believe that the function of publishers will continue unabated in the future with maybe a few exceptions here and there, but books will continue to originate through publishers. Each participant in the marketplace will have its role.

Do you personally think that enhanced eBooks have a future?

Yes, mostly in non-fiction, but also for certain fiction. If you have a few pictures and maybe a couple of videos and some audio it may enhance the reading experience. The graphic aspects of the book should not overwhelm the content of the book, but should enhance it. So there has to be a measure. Time will tell, we will see. If the way you do it sells more books than the way I do it, then you’re right and I’m wrong. Apart from that, every book is different. So maybe you picked the right book and I picked the wrong book.

It is just a matter of innovation and…

Trial and error, trial and error.

Do you think there will be a lot of books that will be only published electronically instead of print and electronic at the same time?

There will certainly be more books that will see the light of day electronically than ever before because of self-publishing: if you want to write a book and you don´t want to go through the hassle of going to a publisher, you publish it yourself if you have the money to do it. And, if the book sells, a publisher might come to you and say “Sell me your rights,” and then they will do a better job.

Do you think the primary role of the best-sellers in the industry will continue in the future?

There will always be best-sellers. My sense is that, if today best-sellers represent 20 to 25% of the publishing house revenue, maybe in the future they will represent less. Because the marketing through the digital media, through the internet, is going to be so vast that we will sell more copies of a lot of more books in the mid-list. So the weight of the best-seller is going to be somewhat less, I think! I am not sure!

With so many books published, what do you think about the content?

The content is king. I would discourage publishers to publish a lot of books just for the sake of publishing. However it is inevitable that with the ability to publish digitally in some cases the quality may suffer, and that is precisely why we need publishers that, with their publishing flair and editorial skills, will ensure to a great extent the quality of the books.

What’s in store for the publishing industry in 100 years?

I do not know the ratios, but I envision the prevalence of the digital technology. I don’t think we will see the paper book disappear. The paper book will evolve possibly in the direction of a keepsake, a precious item, very selective buying, and very selective publishing. A hundred years is a long time, and neither you nor I can project so far away, but the digital technology will prevail.

Thank you very much for sharing all these experiences. I still have one question: When you began in publishing, did you follow any leader or were there any people that inspired you?

There is one person to whom I really owe everything I know who is Oscar Dystel. He really taught me the rudiments of publishing very fast and very well, and I was able to absorb them and use them for the rest of my career. So I owe him a lot. I worked with him from 1975 to 1989. Well, maybe a little less because he left before. But I worked for a long time for him. He was one of the towering figures in publishing.

I am very happy you say that. Did you know that there is a special scholarship in my publishing department at New York University that honors his figure, the Oscar Dystel Fellowship?

Yes, I set it up! Well, it was established, I believe, in 1981, and Reinhard Mohn, the head of Bertelsmann, set it up at my suggestion. I am happy that is still goes on…

Yes it does. It still goes on.

This interview was originally published in the Spanish magazine Trama/Texturas, issue number 17, April 2012.

The interviewer, Joana Costa Knufinke was born in Barcelona, Spain. Before coming to the United States, she pursued a publishing career first as an intern at a film and literary agency, later in the rights department of RBA Libros, and afterwards as an editor of children’s and young adult books at the same publishing house. She is currently a Fulbright Scholar in the Masters in Publishing Program at New York University and a PhD candidate at The Literature Program of the University of Barcelona.

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